Prospectus
September 30, 1996 , as revised
April 30, 1997
Putnam Arizona Tax Exempt Income Fund (the "Arizona fund")
Putnam Florida Tax Exempt Income Fund (the "Florida fund")
Putnam Massachusetts Tax Exempt Income Fund (the "Massachusetts
fund")
Putnam Michigan Tax Exempt Income Fund (the "Michigan fund")
Putnam Minnesota Tax Exempt Income Fund (the "Minnesota fund")
Putnam New Jersey Tax Exempt Income Fund (the "New Jersey fund")
Putnam Ohio Tax Exempt Income Fund (the "Ohio fund")
Putnam Pennsylvania Tax Exempt Income Fund (the "Pennsylvania
fund")
Class A, B and M shares
INVESTMENT STRATEGY: TAX-ADVANTAGED
This prospectus explains concisely what you should know before
investing in the funds. Please read it carefully and keep it for
future reference. You can find more detailed information about
each fund in the September 30, 1996 statement of additional
information ("SAI"), as amended from time to time. For a free
copy of the SAI or other information, call Putnam Investor
Services at 1-800-225-1581. The SAI has been filed with the
Securities and Exchange Commission (the "Commission") and
is incorporated into this prospectus by reference. The
Commission maintains a Web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference into this
prospectus and the SAI, and other information regarding
registrants that file electronically with the Commission.
Each fund invests primarily in a portfolio of tax-exempt
securities, which may include securities of issuers other than
the relevant state and its political subdivisions.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
BOSTON*LONDON*TOKYO
ABOUT THE FUNDS
Expenses summary Page number
This section describes the sales charges, management fees, and
annual operating expenses that apply to various classes of a
fund's shares. Use it to help you estimate the impact of
transaction costs on your investment over time.
Financial highlights Page number
Study this table to see, among other things, how a fund performed
each year for the past 10 years or since it began investment
operations if it has been in operation for less than 10 years.
Objectives Page number
Read this section to make sure a fund's objectives are consistent
with your own.
How the funds pursue their objectives Page number
This section explains in detail how a fund seeks its investment
objectives.
Risk factors. All investments entail some risk. Read
this section to make sure you understand the risks that are
associated with an investment in a fund.
How performance is shown Page number
This section describes and defines the measures used to assess
fund performance. All data are based on past investment results
and do not predict future performance.
How the funds are managed Page number
Consult this section for information about a fund's management,
allocation of its expenses, and how purchases and sales of
securities are made.
Organization and history Page number
In this section, you will learn when a fund was introduced, how
it is organized, how it may offer shares, and who its Trustees
are.
ABOUT YOUR INVESTMENT
Alternative sales arrangements Page number
Read this section for descriptions of the classes of shares this
prospectus offers and for points you should consider when making
your choice.
How to buy shares Page number
This section describes the ways you may purchase shares and tells
you the minimum amounts required to open various types of
accounts. It explains how sales charges are determined and how
you may become eligible for reduced sales charges on each class
of shares.
Distribution plans Page number
This section tells you what distribution fees are charged against
each class of shares.
<PAGE>
How to sell shares Page number
In this section you can learn how to sell fund shares, either
directly to a fund or through an investment dealer.
How to exchange shares Page number
Find out in this section how you may exchange fund shares for
shares of other Putnam funds. The section also explains how
exchanges can be made without sales charges and the conditions
under which sales charges may be required.
How a fund values its shares Page number
This section explains how a fund determines the value of its
shares.
How a fund makes distributions to shareholders; tax
information Page number
This section describes the various options you have in choosing
how to receive fund dividends. It also discusses the tax status
of the payments and counsels you to seek specific advice about
your own situation.
ABOUT PUTNAM INVESTMENTS, INC. Page number
Read this section to learn more about the companies that provide
marketing, investment management, and shareholder account
services to Putnam funds and their shareholders.
APPENDIX
Securities ratings Page number<PAGE>
About the funds
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs
from investing in a fund and expenses based on the most recent
fiscal year. The examples show the cumulative expenses
attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B Class M
shares shares shares
Shareholder transaction
expenses
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) 4.75% NONE* 3.25%*
Deferred sales charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE** thereafter NONE
<PAGE>
Annual fund operating expenses
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
---------- ----- -------- -----------
Arizona fund
class A 0.60% 0.20% 0.23% 1.03%
class B 0.60% 0.85% 0.22% 1.67%
class M 0.60% 0.50% 0.23% 1.33%
Florida fund
class A 0.60% 0.20% 0.15% 0.95%
class B 0.60% 0.85% 0.15% 1.60%
class M 0.60% 0.50% 0.13% 1.23%
Massachusetts fund
class A 0.60% 0.20% 0.15% 0.95%
class B 0.60% 0.85% 0.15% 1.60%
class M 0.60% 0.50% 0.14% 1.24%
Michigan fund
class A 0.60% 0.20% 0.20% 1.00%
class B 0.60% 0.85% 0.20% 1.65%
class M 0.60% 0.50% 0.18% 1.28%
Minnesota fund
class A 0.60% 0.20% 0.21% 1.01%
class B 0.60% 0.85% 0.22% 1.67%
class M 0.60% 0.50% 0.22% 1.32%
New Jersey fund
class A 0.60% 0.20% 0.16% 0.96%
class B 0.60% 0.85% 0.16% 1.61%
class M 0.60% 0.50% 0.14% 1.24%
Ohio fund
class A 0.60% 0.20% 0.16% 0.96%
class B 0.60% 0.85% 0.16% 1.61%
class M 0.60% 0.50% 0.17% 1.27%
Pennsylvania fund
class A 0.60% 0.20% 0.18% 0.98%
class B 0.60% 0.85% 0.17% 1.62%
class M 0.60% 0.50% 0.18% 1.28%
The tables are provided to help you understand the expenses of
investing in each fund and your share of the operating expenses
each fund incurs. The expenses shown in the table do not reflect
the application of credits that reduce fund expenses. The 12b-1
fees for class M shares for the Arizona fund and the Pennsylvania
fund reflect amounts currently payable under the respective class
M distribution plans. Other expense information shown in the
table for class M shares of the Arizona and Pennsylvania funds
has been restateds based on the expenses for each fund's class A
shares for the most recent fiscal year in order to more
accurately reflect each fund's expenses for a full fiscal year.
Each fund's most recent fiscal period was approximately eleven
months. For the Arizona fund, actual management fees for class M
shares were 0.52% and annualized management fees were 0.57%,
actual and annualized 12b-1 fees were 0.46% and 0.50%,
respectively, actual and annualized "Other expenses" were 0.11%
and 0.12%, respectively , and actual and annualized
total operating expenses were 1.09% and 1.19%, respectively. For
the Pennsylvania fund, actual management fees for class M shares
were 0.53% and annualized management fees were 0.58%, actual and
annualized 12b-1 fees were 0.46% and 0.50%, respectively, actual
and annualized "Other expenses" were 0.14% and 0.16%,
respectively , and actual and annualized total operating
expenses were 1.13% and 1.24%, respectively.
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 3 5 10
year years years years
Arizona fund
class A $58 $79 $102 $167
class B $67 $83 $111 $181***
class B (no redemption) $17 $53 $91 $181***
class M $46 $73 $103 $187
Florida fund
class A $57 $76 $98 $159
class B $66 $80 $107 $173***
class B (no redemption) $16 $50 $87 $173***
class M $45 $70 $98 $177
Massachusetts fund
class A $57 $76 $98 $159
class B $66 $80 $107 $173***
class B (no redemption) $16 $50 $87 $173***
class M $45 $71 $98 $178
Michigan fund
class A $57 $78 $100 $164
class B $67 $82 $110 $178***
class B (no redemption) $17 $52 $90 $178***
class M $45 $72 $100 $182
<PAGE>
Minnesota fund
class A $57 $78 $101 $165
class B $67 $83 $111 $180***
class B (no redemption) $17 $53 $91 $180***
class M $46 $73 $102 $186
New Jersey fund
class A $57 $77 $98 $160
class B $66 $81 $108 $174***
class B (no redemption) $16 $51 $88 $174***
class M $45 $71 $98 $178
Ohio fund
class A $57 $77 $98 $160
class B $66 $81 $108 $174***
class B (no redemption) $16 $51 $88 $174***
class M $45 $71 $100 $181
Pennsylvania fund
class A $57 $77 $99 $162
class B $66 $81 $108 $175***
class B (no redemption) $16 $51 $88 $175***
class M $45 $72 $100 $182
<PAGE>
The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return varies.
* The higher 12b-1 fees borne by class B and class M shares
may cause long-term shareholders to pay more than the
economic equivalent of the maximum permitted front-end sales
charge on class A shares.
** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of class A shares that were purchased
without an initial sales charge . See "How to buy shares -
Class A shares."
*** Reflects conversion of class B shares to class A shares
(which pay lower ongoing expenses) approximately eight years
after purchase. See "Alternative sales arrangements."
Financial highlights
The following tables present per share financial information for
class A, B and M shares. This information has been audited and
reported on by the independent accountants. The "Report of
independent accountants" and financial statements included in
each fund's annual report to shareholders for the 1996 fiscal
year are incorporated by reference into this prospectus. Each
fund's annual report, which contains additional unaudited
performance information, is available without charge upon
request. <PAGE>
PUTNAM ARIZONA TAX EXEMPT INCOME FUND
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 7, TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-37992.) <PAGE>
PUTNAM FLORIDA TAX EXEMPT INCOME FUND
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 7, TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-35677.) <PAGE>
PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 16, TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-5416.) <PAGE>
PUTNAM MICHIGAN TAX EXEMPT INCOME FUND
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 16, TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-4529.) <PAGE>
PUTNAM MINNESOTA TAX EXEMPT INCOME FUND
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 16, TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-4527.) <PAGE>
PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 7, TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-32550.) <PAGE>
PUTNAM OHIO TAX EXEMPT INCOME FUND
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 16, TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-8924.) <PAGE>
PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND
(THE TABLE IS INCORPORATED BY REFERENCE FROM POST-EFFECTIVE
AMENDMENT NO. 9, TO THE FUND'S REGISTRATION STATEMENT, FILE NO.
33-28321.) <PAGE>
OBJECTIVES
Each fund seeks as high a level of current income exempt from
federal income tax and personal income tax (if any) of its
respective state as Putnam Investment Management, Inc., the
funds' investment manager ("Putnam Management"), believes is
consistent with preservation of capital. None of the funds is
intended to be a complete investment program, and there is no
assurance that any fund will achieve its objective. Each fund may
also invest in fixed income securities not included in the
definition of tax-exempt securities and may hold a portion of its
assets in cash or money market instruments.
HOW THE FUNDS PURSUE THEIR OBJECTIVES
Basic investment strategy
Each fund seeks its objective by following the fundamental
investment policy of investing at least 80% of its net assets in
tax-exempt securities (which are described below), except when
investing for defensive purposes during times of adverse market
conditions.
Under normal market conditions, the Florida fund will invest at
least 65% of its net assets in tax-exempt securities issued by
the State of Florida, its political subdivisions and their
agencies and instrumentalities and in other tax-exempt securities
which are exempt from the Florida intangibles tax. The Florida
fund generally will seek to select investments that will enable
its shares to be exempt from this tax, except when pursuing the
alternative investment strategies described below. Such
investments at times may have lower yields than other tax-exempt
securities available for investment by the Florida fund. This
investment strategy could also result in higher portfolio
turnover and related transaction costs. See "How a fund makes
distributions to shareholders; tax information--Florida taxes."
Under current law, to the extent distributions by a fund are
derived from interest on tax-exempt securities (as defined with
respect to such fund), such distributions will generally be
exempt from federal income tax and personal income tax in the
relevant state (other than any applicable federal or state
alternative minimum tax or any state minimum corporate income
tax). Certain states may impose additional requirements on the
composition of a fund's portfolio in order for distributions from
that fund to be exempt from the foregoing state taxes.
Although Florida does not impose an individual income
tax , it does impose certain additional requirements on the
composition of the Florida fund's portfolio in order for shares
of that fund to be exempt from the Florida intangibles tax. See
"How a fund makes distributions to shareholders; tax
information."
Investments by each fund will be limited to securities rated at
least Ba or BB by a nationally recognized securities
rating agency, such as Standard & Poor's ("S&P") or Moody's
Investors Service, Inc. ("Moody's") , or unrated
securities that Putnam Management determines are of comparable
quality. A fund will not purchase a tax-exempt security
rated Ba or BB by each of the agencies rating the
security , or, if unrated, determined by Putnam Management to
be of comparable quality if, as a result, more than 25% of its
total assets would be of that quality. The rating services'
descriptions of the five highest grades of debt securities are
included in the appendix to this prospectus. Securities rated Ba
or BB (and unrated securities of comparable quality) are
considered to have speculative elements, with large uncertainties
or major exposures to adverse conditions. The foregoing
investment limitations will be measured at the time of purchase
and, to the extent that a security is assigned a different rating
by one or more of the various rating agencies, Putnam Management
will use the highest rating assigned by any agency.
Putnam Management expects that each fund will generally invest in
tax-exempt securities of longer maturities (10 years or more),
but each fund may invest in tax-exempt securities having a broad
range of maturities.
Alternative minimum tax
Interest income distributed by a fund from certain types of tax-
exempt securities may be subject to federal alternative minimum
tax for individuals and corporations.
In determining compliance with the 80% test described above, it
is a fundamental policy of each fund to exclude from the
definition of tax-exempt securities any securities the interest
from which may be subject to the federal alternative minimum tax
for individuals. All tax-exempt interest dividends will,
however, be included in determining the federal
alternative minimum taxable income of corporations.
Alternative investment strategies
At times Putnam Management may judge that conditions in the
markets for tax-exempt securities make pursuing a fund's basic
investment strategy inconsistent with the best interests of its
shareholders. At such times Putnam Management may temporarily
use alternative strategies primarily designed to reduce
fluctuations in the value of fund assets.
In implementing these defensive strategies, a fund may invest
without limit in taxable obligations, including: obligations of
the U.S. government, its agencies or instrumentalities;
obligations issued by governmental issuers in other states, the
interest on which would be exempt from federal income tax; other
debt securities rated within the four highest grades by either
Moody's or S&P; commercial paper rated in the highest grade by
either rating service (Prime-1 or A-1+, respectively);
certificates of deposit and bankers' acceptances; repurchase
agreements; or any other securities that Putnam Management
considers consistent with such defensive strategies.
It is impossible to predict when, or for how long, these
alternative strategies will be used.
Tax-exempt securities
The term "tax-exempt securities," when used with respect to a
particular fund, includes obligations of a state and its
political subdivisions and their agencies, instrumentalities or
other governmental units, the interest on which, in the opinion
of bond counsel, is exempt from federal income tax and (except
for Florida, which has no personal income tax) personal or gross
income tax of the relevant state.
These securities are issued to obtain funds for various public
purposes, such as the construction of public facilities, the
payment of general operating expenses or the refunding of
outstanding debts.
They may also be issued to finance various private activities,
including the lending of funds to public or private institutions
for the construction of housing, educational or medical
facilities, or to fund short-term cash requirements. They may
also include certain types of industrial development bonds,
private activity bonds or notes issued by public authorities to
finance privately owned or operated facilities.
Short-term tax-exempt securities may be issued as interim
financing in anticipation of tax collections, revenue receipts or
bond sales to finance various public purposes. Tax-exempt
securities also include obligations issued by certain other
governmental entities, such as U.S. territories, if these debt
obligations generate interest income that is exempt from federal
income tax and (except for Florida, which has no personal income
tax) the personal or gross income tax of the relevant state.
The two principal classifications of tax-exempt securities are
general obligation and special obligation (or special revenue
obligation) securities.
General obligation securities involve a pledge of the credit of
an issuer possessing taxing power and are payable from the
issuer's general unrestricted revenues. Their payment may depend
on an appropriation by the issuer's legislative body. The
characteristics and methods of enforcement of general obligation
securities vary according to the law applicable to the particular
issuer.
Special obligation (or special revenue obligation) securities are
payable only from the revenues derived from a particular facility
or class of facilities, or a specific revenue source, and
generally are not payable from the unrestricted revenues of the
issuer. Industrial development bonds and private activity bonds
are in most cases special obligation securities, whose credit
quality is tied to the private user of the facilities.
A fund may also invest in securities representing interests in
tax-exempt securities, known as "inverse floating obligations" or
"residual interest bonds." These obligations pay interest rates
that vary inversely with changes in the interest rates of
specified short-term tax-exempt securities or an index of short-
term tax-exempt securities. The interest rates on inverse
floating obligations or residual interest bonds will typically
decline as short-term market interest rates increase and increase
as short-term market rates decline.
<PAGE>
These securities have the effect of providing a degree of
investment leverage. They will generally respond to changes in
market interest rates more rapidly than fixed-rate long-term
securities (typically twice as fast). As a result, the market
values of inverse floating obligations and residual interest
bonds will generally be more volatile than the market values of
fixed-rate tax-exempt securities.
Risk factors
The values of tax-exempt securities fluctuate in response to
changes in interest rates. A decrease in interest rates will
generally result in an increase in the value of a fund's assets.
Conversely, during periods of rising interest rates, the value of
fund assets will generally decline. The magnitude of these
fluctuations generally is greater for securities with longer
maturities. However, the yields on such securities are also
generally higher. In addition, the values of fixed-income
securities are affected by changes in general economic conditions
and business conditions affecting the specific industries of
their issuers.
Changes by recognized rating services in their ratings of a
fixed-income security and changes in the ability of an issuer to
make payments of interest and principal may also affect the value
of these investments. Changes in the value of portfolio
securities generally will not affect income derived from these
securities, but will affect a fund's net asset value.
Each fund may invest in both higher-rated and lower-rated tax-
exempt securities. Lower-rated securities are securities rated
below BBB or Baa by nationally recognized securities rating
agencies , and, together with unrated securities of comparable
quality, are commonly known as "junk bonds." The values of
these securities generally fluctuate more than those of higher-
rated securities. In addition, the lower rating reflects a
greater possibility that the financial condition of the issuer or
adverse changes in general economic conditions, or both, may
impair the ability of the issuer to make payments of income and
principal.
The tables below show the percentages of fund assets for each
fund invested during fiscal 1996 in securities assigned to the
various rating categories by S&P, or, if unrated by S&P, assigned
to comparable rating categories by another rating agency,
and in unrated securities determined by Putnam Management to be
of comparable quality.
<PAGE>
<TABLE>
<CAPTION>
Arizona fund Massachusetts fund Michigan fund
------------------------- -------------------------- ------------------------
Unrated Unrated Unrated
Rated securities Rated securities Rated securities
securities, of comparable securities, of comparable securities, of comparable
as percentage quality, as as percentage quality, as as percentage quality, as
of net percentage of of net percentage of of net percentage of
Ratings assets net assets assets net assets assets net assets
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
"AAA" 50.47% - 41.26% 1.95% 53.12% -
"AA" 24.77 0.33% 1.52 - 8.29 -
"A" 9.57 - 19.25 0.21 8.80 2.64
"BBB" 4.87 5.25 12.44 5.23 18.59 2.09
"BB" 0.67 5.17 1.40 16.77 0.94 5.75
"B" - - - 1.11 0.03 0.93
------ ------ ------ ------ ------- ------
90.35% 10.75% 75.87% 25.27% 89.77% 11.41%
- ------------------------------------------------------------------------------------------------------------------------
<PAGE>
Florida fund Minnesota fund Ohio fund
------------------------- -------------------------- ------------------------
Unrated Unrated Unrated
Rated securities Rated securities Rated securities
securities, of comparable securities, of comparable securities, of comparable
as percentage quality, as as percentage quality, as as percentage quality, as
of net percentage of of net percentage of of net percentage of
Ratings assets net assets assets net assets assets net assets
- ------------------------------------------------------------------------------------------------------------------------
"AAA" 67.16% 0.16% 49.44% - 66.48% 1.03%
"AA" 8.57 0.33 23.29 - 7.11 -
"A" 8.72 - 13.15 - 10.60 0.19
"BBB" 10.84 1.11 8.90 2.32 7.56 4.70
"BB" - 3.77 - 3.94 0.70 3.66
"B" - 0.86 - - - -
------ ------ ------ ------ ------- ------
95.41% 5.91% 94.77% 6.26% 92.45% 9.58%<PAGE>
New Jersey fund Pennsylvania fund
---------------- -----------------------------------
Unrated Unrated
Rated securities Rated securities
securities, of comparable securities, of comparable
as percentage quality, as as percentage quality, as
of net percentage of of fund percentage of
Ratings assets net assets assets fund assets
- ------------------------------------------------------------------------------------------------------------------------
"AAA" 50.04% - 65.89 0.13%
"AA" 14.00 - 4.21 -
"A" 11.27 0.93 8.81 -
"BBB" 7.89 1.55 13.47 3.24
"BB" 3.92 12.10 2.90 3.24
"B" - - - 0.20
------ ------ ------- ------
87.12% 14.58% 95.28% 6.81%
</TABLE>
<PAGE>
Putnam Management seeks to minimize the risks of investing in
lower-rated securities through careful investment analysis.
However, the amount of information available about the financial
condition of an issuer of tax-exempt securities may not be as
extensive as that which is made available by corporations whose
securities are publicly traded. When a fund invests in tax-
exempt securities in the lower rating categories, the achievement
of its goals is more dependent on Putnam Management's ability
than would be the case if it were investing in tax-exempt
securities in the higher rating categories. Investors should
consider carefully their ability to assume the risks of owning
shares of a mutual fund that may invest in securities in the
lower rating categories.
A fund will not necessarily dispose of a security when its rating
is reduced below its rating at the time of purchase. However,
Putnam Management will consider such reduction in its
determination of whether a fund should continue to hold the
security in its portfolio.
At times, a substantial portion of fund assets may be invested in
securities as to which the fund, by itself or together with other
funds and accounts managed by Putnam Management and its
affiliates, holds all or a major portion. Under adverse market
or economic conditions or in the event of adverse changes in the
financial condition of the issuer, it may be more difficult to
sell these securities when Putnam Management believes it
advisable to do so or the fund may be able to sell the securities
only at prices lower than if they were more widely held. Under
these circumstances, it may also be more difficult to determine
the fair value of such securities for purposes of computing a
fund's net asset value.
In order to enforce its rights in the event of a default of these
securities, a fund may be required to participate in various
legal proceedings or take possession of and manage assets
securing the issuer's obligations on the securities. This could
increase fund operating expenses and adversely affect its net
asset value. Any income derived from the ownership or operation
of such assets would not be tax-exempt. The ability of a holder
of a tax-exempt security to enforce the terms of that security in
a bankruptcy proceeding may be more limited than would be the
case with respect to securities of private issuers.
Certain securities held by a fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer were
to redeem securities held by a fund during a time of declining
interest rates, that fund may not be able to reinvest the
proceeds in securities providing the same investment return as
the securities redeemed.
Each fund may invest in so-called "zero-coupon" bonds, which are
issued at a significant discount from face value and pay interest
only at maturity rather than at intervals during the life of the
security. The values of zero-coupon bonds are subject to greater
fluctuation in response to changes in market interest rates than
bonds that pay interest currently.
Zero-coupon bonds allow an issuer to avoid the need to generate
cash to meet current interest payments. Accordingly, such bonds
may involve greater credit risks than bonds paying interest
currently. A fund is required to accrue and distribute income
from zero-coupon bonds on a current basis, even though it does
not receive that income currently in cash. Thus it may be
necessary to sell other investments to obtain cash needed to make
income distributions.
The secondary market for tax-exempt securities is generally less
liquid than that for taxable fixed-income securities,
particularly for securities in the lower rating categories. Thus
it may be more difficult to value or buy and sell certain of
these securities. Certain investment grade securities share some
of the risk factors discussed above with respect to lower-rated
securities.
For additional information concerning the risks associated with
investing in securities in the lower rating categories, see the
SAI.
Since the funds invest primarily in tax-exempt securities, the
value of their shares may be especially affected by factors
pertaining to the economy of the relevant state and other factors
affecting the ability of issuers of tax-exempt securities to meet
their obligations.
As a result, the value of each fund's shares may fluctuate more
widely than the value of shares of a portfolio investing in
securities relating to a number of different states. The ability
of state, county or local governments to meet their obligations
will depend primarily on the availability of tax and other
revenues to those governments and on their fiscal conditions
generally.
The amounts of tax and other revenues available to governmental
issuers of tax-exempt securities may be affected from time to
time by economic, political and demographic conditions within or
outside of the particular state. In addition, constitutional or
statutory restrictions may limit a government's power to raise
revenues or increase taxes. The availability of federal, state
and local aid to issuers of tax-exempt securities may also affect
their ability to meet their obligations.
Payments of principal and interest on special obligation
securities will depend on the economic condition of the facility
or specific revenue source from whose revenues the payments will
be made. The facility's economic status, in turn, could be
affected by economic, political and demographic conditions
affecting the particular state.
Any reduction in the actual or perceived ability of an issuer of
tax-exempt securities to meet its obligations, including a
reduction in the rating of the issuer's outstanding securities,
would likely have an adverse effect on the market value and
marketability of its obligations. Doubts surrounding an issuer's
ability to meet its obligations could adversely affect the values
of other tax-exempt securities as well.
Diversification and concentration policies
Under the Investment Company Act of 1940 and the Internal Revenue
Code of 1986, each of the Massachusetts, Michigan, Minnesota,
Ohio and Pennsylvania funds may generally invest up to 25% of its
total assets in the securities of any one issuer, and each of the
Arizona, Florida and New Jersey funds may generally invest up to
25% of its total assets in the securities of each of any two
issuers. Otherwise, each of the funds may not invest more than 5%
of its assets in the securities of any one issuer.
Because of these limitations and the relatively small number of
issuers of tax-exempt securities available to each fund, each
fund is more likely to invest a higher percentage of its assets
in the securities of a single issuer than an investment company
that invests in a broad range of tax-exempt securities. This
practice involves an increased risk of loss to a fund if an
issuer were unable to make interest or principal payments or if
the market value of these securities were to decline.
No fund will invest more than 25% of its total assets in any one
industry. Governmental issuers of tax-exempt securities are not
considered part of any "industry." However, for this purpose
(and for diversification purposes discussed above) tax-exempt
securities backed only by the assets and revenues of
nongovernmental users may be deemed to be issued by such
nongovernmental users. Thus, the 25% limitation would apply to
these obligations.
It is possible that a fund may invest more than 25% of its assets
in a broader segment of the market for tax-exempt securities,
such as revenue obligations of hospitals and other health care
facilities, housing revenue obligations, or airport revenue
obligations. This would be the case only if Putnam Management
determined that the yields available from obligations in a
particular segment of the market justified the additional risks
associated with such concentration.
Although these obligations could be supported by the credit of
governmental issuers or by the credit of nongovernmental issuers
engaged in a number of industries, economic, business, political
and other developments generally affecting the revenues of such
issuers may have a general adverse effect on all tax-exempt
securities in a particular market segment. (Examples of such
developments include proposed legislation or pending court
decisions affecting the financing of such projects and market
factors affecting the demand for their services or products.)
Each fund reserves the right to invest more than 25% of its
assets in industrial development bonds and private activity
securities.
<PAGE>
Investments in premium securities
During a period of declining interest rates, many of a fund's
portfolio investments will likely bear coupon rates that are
higher than current market rates, regardless of whether these
securities were originally purchased at a premium. These
securities would generally carry market values greater than the
principal amounts payable on maturity, which would be reflected
in the net asset value of fund shares.
The values of these "premium" securities tend to approach the
principal amount as the securities approach maturity (or call
price in the case of securities approaching their first call
date). As a result, an investor who purchases fund shares during
these periods would initially receive higher monthly
distributions (derived from the higher coupon rates payable on
fund investments) than might be available from alternative
investments bearing current market interest rates. But the
investor may face an increased risk of capital loss as these
higher coupon securities approach maturity (or first call date).
In evaluating the potential performance of an investment ,
investors may find it useful to compare the current dividend rate
with a fund's "yield," which is computed on a yield-to-maturity
basis in accordance with SEC regulations and which reflects
amortization of market premiums. See "How performance is shown."
Portfolio turnover
The length of time a fund has held a particular security is not
generally a consideration in investment decisions. A change in
the securities held by a fund is known as "portfolio turnover."
As a result of a fund's investment policies, under certain market
conditions a fund's portfolio turnover rate may be higher than
that of other mutual funds.
Portfolio turnover generally involves some expense, including
brokerage commissions or dealer markups and other transaction
costs on the sale of securities and reinvestment in other
securities. These transactions may result in realization of
taxable capital gains. Portfolio turnover rates are shown in the
section "Financial highlights."
Financial futures and options
Each fund may purchase and sell financial futures contracts and
options.
Each fund may purchase and sell index futures contracts on
the Municipal Bond Index, which are traded on the Chicago Board
of Trade. This index is intended to represent a numerical measure
of market performance for long-term tax-exempt bonds. An "index
future" is a contract to buy or sell units of a particular
securities index at an agreed price on a specified future date.
Depending on the change in value of the index between the time a
fund enters into and terminates an index futures contract, the
fund realizes a gain or loss.
A fund may also purchase and sell put and call options on index
futures or on indexes directly, in addition to or as an
alternative to purchasing and selling index futures. A fund may
also purchase and sell futures contracts and related options on
U.S. Treasury securities, including U.S. Treasury bills, notes
and bonds ("U.S. government securities") and options directly on
U.S. government securities.
In addition, a fund may purchase put and call options on, or
warrants to purchase, tax-exempt securities, either directly or
through custodial arrangements in which a fund and other
investors own an interest in one or more options on tax-exempt
securities.
A fund will engage in these transactions for hedging purposes
and, to the extent permitted by applicable law, for nonhedging
purposes, such as to manage the effective duration
(a measure of
the longevity of the fixed income securities in the fund's
portfolio) of the
fund's portfolio or as a substitute for direct
investment.
The use of futures and options involves certain special risks and
may result in realization of taxable income or capital gains.
Futures and options transactions involve costs and may result in
losses.
Certain risks arise from the possibility of imperfect
correlations among movements in the prices of financial futures
and options purchased or sold by a fund, of the underlying bond
index or U.S. government securities and, in the case of hedging
transactions, of the tax-exempt securities that are the subject
of the hedge.
Other risks arise from the potential inability to close out
futures or options positions. There can be no assurance that a
liquid secondary market will exist for any futures contract or
option at a particular time. Certain provisions of the Internal
Revenue Code and certain regulatory requirements may limit the
use of futures and options transactions. The successful use of
these strategies further depends on the ability of Putnam
Management to forecast interest rates and market movements
correctly.
A more detailed explanation of financial futures and options
transactions, and the risks associated with them, is included in
the SAI.
Other investment practices
Each fund may also engage in the following investment practices,
each of which may result in taxable income or capital gains and
involves certain special risks. The SAI contains more detailed
information about these practices, including limitations designed
to reduce these risks.
Repurchase agreements and forward commitments. A fund may enter
into repurchase agreements on up to 25% of its assets. These
transactions must be fully collateralized at all times. A fund
may also purchase securities for future delivery, which may
increase its overall investment exposure and involves a risk of
loss if the value of the securities declines prior to the
settlement date. These transactions involve some risk if the
other party should default on its obligation and a fund is
delayed or prevented from recovering the collateral or completing
the transaction.
Derivatives
Certain of the instruments in which each fund may invest, such as
futures contracts, options and inverse floating obligations, are
considered to be "derivatives." Derivatives are financial
instruments whose value depends upon, or is derived from, the
value of an underlying asset, such as a security or an index.
Further information about these instruments and the risks
involved in their use is included elsewhere in this prospectus
and in the SAI.
Limiting investment risk
Specific investment restrictions help each fund to limit
investment risks for its shareholders. These restrictions
prohibit the Massachusetts, Michigan, Minnesota, Ohio and
Pennsylvania funds with respect to 75% of total assets, and for
the Arizona, Florida and New Jersey funds with respect to 50% of
total assets from acquiring more than 10% of the voting
securities of any issuer .
They also prohibit a fund from investing more than:
- - (For the Massachusetts, Michigan, Minnesota, Ohio and
Pennsylvania funds with respect to 75% of total assets, and for
the Arizona, Florida and New Jersey funds with respect to 50% of
total assets) invest
more than 5% of the total assets in the
securities of any issuer. (Investments in obligations issued or
guaranteed as to interest or
principal by the U.S. government or
its agencies or instrumentalities are not subject to any
limitation.) *
- -15% of its net assets in securities that are not readily
marketable, securities restricted as to resale (excluding
securities determined by the Trustees (or the person designated
by them to make such determinations) to be readily marketable),
and repurchase agreements maturing in more than seven days.
Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and the funds' other fundamental investment
policies. Except for investment policies designated as
fundamental in this prospectus or the SAI, the investment
policies described in this prospectus and in the SAI are not
fundamental investment policies. The Trustees may change any
non-fundamental investment policy without shareholder approval.
As a matter of policy, the Trustees would not materially change a
fund's investment objective without shareholder approval.
<PAGE>
HOW PERFORMANCE IS SHOWN
Fund advertisements may, from time to time, include performance
information. "Yield" for each class of shares is calculated by
dividing the annualized net investment income per share during a
recent 30-day period by the maximum public offering price per
share of the class on the last day of that period.
For purposes of calculating yield, net investment income is
calculated in accordance with SEC regulations and may differ from
net investment income as determined for tax purposes. SEC
regulations require that net investment income be calculated on a
"yield-to-maturity" basis, which has the effect of amortizing any
premiums or discounts in the current market value of fixed-income
securities. The current dividend rate is based on net investment
income as determined for tax purposes, which may not reflect
amortization in the same manner. See "How the funds pursue their
objectives -- Investments in premium securities."
Yield is based on the price of the shares, including the maximum
initial sales charge in the case of class A and class M shares,
but does not reflect any contingent deferred sales charge in the
case of class B shares. "Tax-equivalent" yield for each class of
shares shows the effect on performance of the tax-exempt status
of distributions received from a fund. It reflects the
approximate yield that a taxable investment must earn for
shareholders at stated income levels to produce an after-tax
yield equivalent to a class's tax-exempt yield.
"Total return" for the one-, five- and ten-year periods (or for
the life of a class, if shorter) through the most recent calendar
quarter represents the average annual compounded rate of return
on an investment of $1,000 in a fund invested at the maximum
public offering price (in the case of class A and class M shares)
or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of class B shares). Total return may
also be presented for other periods or based on investment at
reduced sales charge levels. Any quotation of investment
performance not reflecting the maximum initial sales charge or
contingent deferred sales charge would be reduced if the sales
charge were used.
All data are based on past investment results and do not predict
future performance.
Investment performance, which will vary, is based on many
factors, including market conditions, portfolio composition, fund
operating expenses and which class of shares the investor
purchases. Investment performance also often reflects the risks
associated with a fund's investment objective and policies.
These factors should be considered when comparing a fund's
investment results with those of other mutual funds and other
investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. Fund performance may be
compared to that of various indexes. See the SAI.
HOW THE FUNDS ARE MANAGED
The Trustees are responsible for generally overseeing the conduct
of fund business. Subject to such policies as the Trustees of
each fund may determine, Putnam Management furnishes a continuing
investment program for each fund and makes investment decisions
on its behalf. Subject to the control of the Trustees, Putnam
Management also manages each fund's other affairs and business.
Each fund pays Putnam Management a quarterly fee for these
services based on average net assets. See "Expenses summary" and
the SAI.
The following officers of Putnam Management have had primary
responsibility for the day-to-day management of the indicated
funds' portfolios since the years stated below:
Business experience
Year (at least 5 years)
------- -----------------
Howard K. Manning Employed as an investment
Senior Vice President professional by Putnam
Management
Arizona fund 1995 since 1986.
Ohio fund 1996
Pennsylvania fund 1996
Leslie J. Burke Employed as an investment
Vice President professional by Putnam
Management since 1992.
Florida fund 1996
Massachusetts fund 1996
Michigan fund 1996
Minnesota fund 1996
New Jersey fund 1995
Each fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses and payments under
its distribution plans (which are in turn allocated to the
relevant class of shares). Each fund also reimburses Putnam
Management for the compensation and related expenses of certain
fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by the
Trustees.
Putnam Management places all orders for purchases and sales of
fund securities. In selecting broker-dealers, Putnam Management
may consider research and brokerage services furnished to it and
its affiliates. Subject to seeking the most favorable price and
execution available, Putnam Management may consider sales of fund
shares (and, if permitted by law, of the other Putnam funds) as a
factor in the selection of broker-dealers.
<PAGE>
ORGANIZATION AND HISTORY
Each fund is a separate Massachusetts business trust.
Putnam Arizona Tax Exempt Income Fund was organized on November
9, 1990. Putnam Florida Tax Exempt Income Fund was organized on
June 27, 1990. Each of Putnam Massachusetts Tax Exempt Income
Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota
Tax Exempt Income Fund and Putnam Ohio Tax Exempt Income Fund,
which prior to October 1, 1995 were known as Putnam Massachusetts
Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund
II, Putnam Minnesota Tax Exempt Income Fund II and Putnam Ohio
Tax Exempt Income Fund II, respectively, were organized on July
14, 1989. Putnam New Jersey Tax Exempt Income Fund was organized
on November 17, 1989. Putnam Pennsylvania Tax Exempt Income Fund
was organized on April 20, 1989. A copy of each fund's Agreement
and Declaration of Trust, which is governed by Massachusetts law,
is on file with the Secretary of State of The Commonwealth of
Massachusetts.
Each of the Massachusetts, Michigan, Minnesota, Ohio and
Pennsylvania funds is an open-end, diversified management
investment company and each of the Arizona, Florida and New
Jersey funds is an open-end, non-diversified management
investment company. Each fund has an unlimited number of
authorized shares of beneficial interest. The Trustees may,
without shareholder approval, create two or more series of shares
representing separate investment portfolios. Any such series of
shares may be divided without shareholder approval into two or
more classes of shares having such preferences and special or
relative rights and privileges as the Trustees determine. Only
class A, B and M shares are offered by this prospectus. Each
fund may also offer other classes of shares with different sales
charges and expenses. Because of these different sales charges
and expenses, the investment performance of the classes will
vary. For more information, including your eligibility to
purchase any other class of shares, contact your investment
dealer or Putnam Mutual Funds (at 1-800-225-1581).
Each share has one vote, with fractional shares voting
proportionally. Shares of all classes will vote together as a
single class except when otherwise required by law or as
determined by the Trustees. Shares are freely transferable, are
entitled to dividends as declared by the Trustees, and, if a fund
were liquidated, would receive the net assets of that fund. Each
fund may suspend the sale of shares at any time and may refuse
any order to purchase shares. Although each fund is not required
to hold annual meetings of its shareholders, shareholders holding
at least 10% of the outstanding shares entitled to vote have the
right to call a meeting to elect or remove Trustees, or to take
other actions as provided in each fund's Agreement and
Declaration of Trust.
Although each fund is offering only its own shares in this
prospectus, it is possible that a fund might become liable for
any misstatement in the prospectus about another fund. The
Trustees of each fund have considered this factor in approving
the use of a single prospectus.
If you own fewer shares than the minimum set by the Trustees
(presently 20 shares), a fund may choose to redeem your shares.
You will receive at least 30 days' written notice before a fund
redeems your shares, and you may purchase additional shares at
any time to avoid a redemption. A fund may also redeem shares if
you own shares above a maximum amount set by the Trustees. There
is presently no maximum, but the Trustees may establish one at
any time, which could apply to both present and future
shareholders.
The funds' Trustees: George Putnam,* Chairman. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; William F. Pounds, Vice
Chairman. Professor of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology; Jameson Adkins
Baxter, President, Baxter Associates, Inc.; Hans H. Estin, Vice
Chairman, North American Management Corp.; John A. Hill, Chairman
and Managing Director, First Reserve Corporation; Ronald J.
Jackson, Former Chairman, President and Chief Executive Officer
of Fisher-Price, Inc., Director of Safety 1st, Inc., Trustee of
Salem Hospital and the Peabody Essex Museum; Elizabeth T.
Kennan, President Emeritus and Professor, Mount Holyoke College;
Lawrence J. Lasser,* Vice President of the Putnam funds.
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Management. Director, Marsh &
McLennan Companies, Inc.; Robert E. Patterson, Executive Vice
President and Director of <PAGE>
Acquisitions, Cabot Partners Limited Partnership; Donald S.
Perkins,* Director of various corporations, including Cummins
Engine Company, Lucent Technologies, Inc., Springs Industries,
Inc. and Time Warner Inc.; George Putnam, III,* President, New
Generation Research, Inc. ; A.J.C. Smith,* Chairman and
Chief Executive Officer, Marsh & McLennan Companies, Inc.; and W.
Nicholas Thorndike, Director of various corporations and
charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern Utilities
Associates. The Trustees are also Trustees of the other Putnam
funds. Those marked with an asterisk (*) are or may be deemed to
be "interested persons" of a fund, Putnam Management or Putnam
Mutual Funds.
<PAGE>
About Your Investment
ALTERNATIVE SALES ARRANGEMENTS
Class A shares. An investor who purchases class A shares pays a
sales charge at the time of purchase. As a result, class A
shares are not subject to any charges when they are redeemed,
except for certain sales at net asset value that are subject to a
contingent deferred sales charge ("CDSC"). Certain purchases of
class A shares qualify for reduced sales charges. Class A shares
bear a lower 12b-1 fee than class B and class M shares. See "How
to buy shares -- Class A shares" and "Distribution plans."
Class B shares. Class B shares are sold without an initial sales
charge, but are subject to a CDSC if redeemed within a specified
period after purchase. Class B shares also bear a higher 12b-1
fee than class A and class M shares. Class B shares
automatically convert into class A shares, based on relative net
asset value, approximately eight years after purchase. For more
information about the conversion of class B shares, see the SAI.
This discussion includes information about how shares acquired
through reinvestment of distributions are treated for conversion
purposes. The discussion also notes certain circumstances under
which a conversion may not occur. Class B shares provide an
investor the benefit of putting all of the investor's dollars to
work from the time the investment is made. Until conversion,
class B shares will have a higher expense ratio and pay lower
dividends than class A and class M shares because of the higher
12b-1 fee. See "How to buy shares -- Class B shares" and
"Distribution plans."
Class M shares. An investor who purchases class M shares pays a
sales charge at the time of purchase that is lower than the sales
charge applicable to class A shares. Certain purchases of class
M shares qualify for reduced sales charges. Class M shares bear
a 12b-1 fee that is lower than class B shares but higher than
class A shares. Class M shares are not subject to any CDSC and
do not convert into any other class of shares. See "How to buy
shares -- Class M shares" and "Distribution plans."
<PAGE>
Which arrangement is best for you? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider class A or
class M shares. Investors who prefer not to pay an initial sales
charge might consider class B shares. Orders for class B shares
for $250,000 or more will be treated as orders for class A shares
or declined. For more information about these sales
arrangements, consult your investment dealer or Putnam Investor
Services. Shares may only be exchanged for shares of the same
class of another Putnam fund. See "How to exchange shares."
HOW TO BUY SHARES
You can open a fund account with as little as $500 and make
additional investments at any time with as little as $50. You can
buy fund shares three ways - through most investment dealers,
through Putnam Mutual Funds (at 1-800-225-1581), or through a
systematic investment plan. If you do not have a dealer, Putnam
Mutual Funds can refer you to one.
Buying shares through Putnam Mutual Funds. Complete an order
form and write a check for the amount you wish to invest, payable
to the appropriate fund. Return the completed form and check to
Putnam Mutual Funds, which will act as your agent in purchasing
shares through your designated investment dealer.
Buying shares through systematic investing. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking or savings account. Application forms
are available from your investment dealer or through Putnam
Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
<PAGE>
Class A shares
The public offering price of class A shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The relevant fund receives the net asset value.
The sales charge is allocated between your investment dealer and
Putnam Mutual Funds as shown in the following table, except when
Putnam Mutual Funds, in its discretion, allocates the entire
amount to your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 25,000 4.99% 4.75% 4.50%
25,000 but under 100,000 4.71 4.50 4.25
100,000 but under 250,000 3.90 3.75 3.50
250,000 but under 500,000 3.09 3.00 2.75
500,000 but under 1,000,000 2.04 2.00 1.85
There is no initial sales charge on purchases of class A shares
of $1 million or more. However, a CDSC of 1.00% or 0.50%,
respectively, will be imposed within the first or second year
after purchase on redemptions by any investor that purchased that
purchased fund shares without an initial sales charge as part of
an investment of $1 million or more.
Shares purchased by investors investing $1 million or more in
class A shares whose dealer of record waived its commission with
the approval of Putnam Mutual Funds are not subject to the CDSC.
In determining whether a CDSC is payable, shares not subject to
any charge will be redeemed first, followed by shares held the
longest during the CDSC period. Any CDSC will be based on the
lower of the shares' cost and current net asset value. Any
shares acquired by reinvestment of distributions will be redeemed
without a CDSC. Putnam Mutual Funds receives the entire amount of
any CDSC you pay. See the SAI for more information about the
CDSC.
Putnam Mutual Funds pays investment dealers of record commissions
on sales of class A shares of $1 million or more based on an
investor's cumulative purchases during the one-year period
beginning with the date of the initial purchase at net asset
value. Each subsequent one-year measuring period for these
purposes will begin with the first net asset value purchase
following the end of the prior period. Such commissions are paid
at the rate of 1.00% of the amount under $3 million, 0.50% of the
next $47 million and 0.25% thereafter.
Class B shares
Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within a specified
period after purchase, as shown in the table below. The
following types of shares may be redeemed without charge at any
time: (i) shares acquired by reinvestment of distributions, and
(ii) shares otherwise exempt from the CDSC, as described in "How
to buy shares -- General" below. For other shares, the amount
of the charge is determined as a percentage of the lesser of the
current market value or the cost of the shares being redeemed.
Year 1 2 3 4 5 6 7+
- -------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%
In determining whether a CDSC is payable on any redemption,
shares not subject to any charge will be redeemed first, followed
by shares held longest during the CDSC period. For this purpose,
the amount of any increase in a share's value above its initial
purchase price is not regarded as a share exempt from the CDSC.
Thus, when a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are
calculated if you exchange your shares, see "How to exchange
shares." Putnam Mutual Funds receives the entire amount of any
CDSC you pay.
Class M shares
The public offering price of class M shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The relevant fund receives the net asset value.
The sales charge is allocated between your investment dealer and
Putnam Mutual Funds as shown in the following table, except when
Putnam Mutual Funds, at its discretion, allocates the entire
amount to your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 50,000 3.36% 3.25% 3.00%
50,000 but under 100,000 2.30 2.25 2.00
100,000 but under 250,000 1.52 1.50 1.25
250,000 but under 500,000 1.01 1.00 1.00
500,000 and above NONE NONE NONE
Sales charges will not apply to class M shares purchased with
redemption proceeds received within the prior 90 days from non-
Putnam mutual funds on which the investor paid a front-end or a
contingent deferred sales charge. Members of qualified groups
may also purchase class M shares without a sales charge.
<PAGE>
General
You may be eligible to buy fund shares at reduced sales charges.
Consult your investment dealer or Putnam Mutual Funds for details
about Putnam's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, qualified
retirement plans, and other plans. Descriptions are also
included in the order form and in the SAI.
Each fund may sell class A, class B and class M shares
at net asset value without an initial sales charge or a
CDSC to current and retired Trustees (and their families),
current and retired employees (and their families) of Putnam
Management and affiliates, registered representatives and other
employees (and their families) of broker-dealers having sales
agreements with Putnam Mutual Funds, employees (and their
families) of financial institutions having sales agreements with
Putnam Mutual Funds (or otherwise having an arrangement with a
broker-dealer or financial institution with respect to sales of
fund shares), financial institution trust departments investing
an aggregate of $1 million or more in Putnam funds, clients of
certain administrators of tax-qualified plans, tax-qualified
plans when proceeds from repayments of loans to participants are
invested (or reinvested) in Putnam funds, "wrap accounts" for the
benefit of clients of broker-dealers, financial institutions or
financial planners adhering to certain standards established by
Putnam Mutual Funds, and investors meeting certain requirements
who sold shares of certain Putnam closed-end funds pursuant to a
tender offer by the closed-end fund.
In addition, each fund may sell shares at net
asset value without an initial sales charge or a CDSC in
connection with the acquisition by a fund of assets of an
investment company or personal holding company. The CDSC will be
waived on redemptions of shares arising out of the death or post-
purchase disability of a shareholder or settlor of a living trust
account, and on redemptions in connection with certain
withdrawals from IRA or other retirement plans. Up to 12% of the
value of shares subject to a systematic withdrawal plan may also
be redeemed each year without a CDSC. The SAI contains
additional information about purchasing shares at reduced sales
charges.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
fund shares at net asset value.
If you are considering redeeming shares or transferring
shares to another person shortly after purchase, you should pay
for those shares with a certified check to avoid any delay in
redemption or transfer. Otherwise, payment may be delayed
until the purchase price of those shares has been collected or,
if you redeem by telephone, until 15 calendar days after the
purchase date. To eliminate the need for safekeeping,
certificates will not be issued for your shares unless you
request them.
Putnam Mutual Funds will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentives or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
DISTRIBUTION PLANS
Class A distribution plan. The class A plans provide for
payments by each fund to Putnam Mutual Funds at the annual rate
of up to 0.35% of average net assets attributable to class A
shares. The Trustees currently limit payments under each class A
plan to the annual rate of 0.20% of such assets.
Putnam Mutual Funds makes quarterly payments to qualifying
dealers (including, for this purpose, certain financial
institutions) to compensate them for services provided in
connection with sales of class A shares and the maintenance of
shareholder accounts. The payments are based on the average net
asset value of class A shares attributable to shareholders for
whom the dealers are designated as the dealer of record.
This calculation excludes until one year after purchase shares
purchased at net asset value by shareholders investing $1 million
or more. These shares are not subject to the one-year exclusion
provision in cases where certain shareholders who invested $1
million or more have made arrangements with Putnam Mutual Funds
and the dealer of record waived the sales commission.
Putnam Mutual Funds makes the quarterly payments at the annual
rate of 0.15% of such average net asset value for shares
outstanding as of March 5, 1993 for the Arizona fund, July 8,
1993 for the Florida and Pennsylvania funds, May 11, 1992 for the
Massachusetts fund, March 9, 1992 for the Michigan, Minnesota and
Ohio funds and December 31, 1992 for the New Jersey fund, and
0.20% of such average net asset value for shares of each fund
acquired after such dates (including class A shares acquired
through reinvestment of distributions).
Class B and class M distribution plans. The class B and class M
plans provide for payments by each fund to Putnam Mutual Funds at
the annual rate of up to 1.00% of average net assets attributable
to class B shares and class M shares, as the case may be. The
Trustees currently limit payments under the class B and class M
plans to the annual rates of 0.85% and 0.50% of such assets,
respectively.
Although class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested (including a prepaid service fee of 0.20% of the
amount invested) to dealers who sell class B shares. These
commissions are not paid on exchanges from other Putnam funds or
on sales to investors exempt from the CDSC.
The amount paid to dealers at the time of the sale of class M
shares is set forth above under "How to buy shares -- Class M
shares." In addition, to further compensate dealers (including
qualifying financial institutions) for services provided in
connection with sales of class B shares and class M shares and
the maintenance of shareholder accounts, Putnam Mutual Funds
makes quarterly payments to qualifying dealers.
The payments are based on the average net asset value of class B
shares and class M shares attributable to shareholders for whom
the dealers are designated as the dealer of record, except for
the first year's service fees for class B shares, which are
prepaid as described above. Putnam Mutual Funds makes the
payments at an annual rate of 0.20% of such average net asset
value of class B shares and class M shares, as the case may be.
Putnam Mutual Funds also pays to dealers, as additional
compensation with respect to the sale of class M shares, 0.20% of
such average net asset value of class M shares. For class M
shares, the total annual payment to dealers equals 0.40% of such
average net asset value.
General. Payments under the plans are intended to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of fund shares, including the
payments to dealers mentioned above. Putnam Mutual Funds may
suspend or modify such payments to dealers.
The payments are also subject to the continuation of the relevant
distribution plan, the terms of service agreements between
dealers and Putnam Mutual Funds, and any applicable limits
imposed by the National Association of Securities Dealers, Inc.
HOW TO SELL SHARES
You can sell your shares to the appropriate fund any day the New
York Stock Exchange is open, either directly to the fund or
through your investment dealer. A fund will only redeem shares
for which it has received payment.
Selling shares directly to your fund. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after your fund receives your request in proper form
less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request
before the close of regular trading on the New York Stock
Exchange.
If you sell shares of a fund having a net asset value of $100,000
or more, the signatures of the registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about where to obtain a signature guarantee. Stock
power forms are available from your investment dealer, Putnam
Investor Services and many commercial banks.
If you want your redemption proceeds sent to an address other
than your address as it appears on Putnam's records, a signature
guarantee is required. Putnam Investor Services usually requires
additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
Your fund generally sends you payment for your shares the
business day after your request is received. Under unusual
circumstances, a fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal
securities law.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on the
account application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records.
Putnam Investor Services will employ these and other reasonable
procedures to confirm that instructions communicated by telephone
are genuine; if it fails to employ reasonable procedures, Putnam
Investor Services may be liable for any losses due to
unauthorized or fraudulent instructions. For information, consult
Putnam Investor Services.
During periods of unusual market changes and shareholder
activity, you may experience delays in contacting Putnam Investor
Services by telephone. In this event, you may wish to submit a
written redemption request as described above, or contact your
investment dealer, as described below. The Telephone Redemption
Privilege is not available if you were issued certificates for
shares that remain outstanding. The Telephone Redemption
Privilege may be modified or terminated without notice.
Selling shares through your investment dealer. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge you for
its services.
<PAGE>
HOW TO EXCHANGE SHARES
You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value . Not all
Putnam funds offer all classes of shares. If you exchange shares
subject to a CDSC, the transaction will not be subject to the
CDSC. However, when you redeem the shares acquired through the
exchange, the redemption may be subject to the CDSC, depending
upon when you originally purchased the shares. The CDSC will be
computed using the schedule of any fund into or from which you
have exchanged your shares that would result in your paying the
highest CDSC applicable to your class of shares. For purposes
of computing the CDSC, the length of time you have owned your
shares will be measured from the date of original purchase and
will not be affected by any exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services. The
form is available from Putnam Investor Services. For federal
income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to
$500,000. Putnam Investor Services' procedures for telephonic
transactions are described above under "How to sell shares." The
Telephone Exchange Privilege is not available if you were issued
certificates for shares that remain outstanding. Ask your
investment dealer or Putnam Investor Services for prospectuses of
other Putnam funds. Shares of certain Putnam funds are not
available to residents of all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of your fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Consult Putnam Investor Services before requesting an
exchange. See the SAI to find out more about the exchange
privilege.
HOW A FUND VALUES ITS SHARES
Each fund calculates the net asset value of a share of each class
by dividing the total value of its assets, less liabilities, by
the number of shares outstanding. Shares are valued as of the
close of regular trading on the New York Stock Exchange each day
the Exchange is open.
Tax-exempt securities are valued on the basis of valuations
provided by a pricing service approved by the Trustees, which
uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in
determining value.
Each fund believes that reliable market quotations generally are
not readily available for purposes of valuing its portfolio
securities. As a result, it is likely that most of the
valuations provided by a pricing service will be based upon fair
value determined on the basis of the factors listed above.
Non-tax-exempt securities for which market quotations are readily
available are valued at market value. Short-term investments
that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets
are valued at their fair value following procedures approved by
the Trustees.
HOW A FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION
Each fund declares all of its net interest income as a
distribution on each day it is open for business. Net interest
income consists of interest accrued on portfolio investments of a
fund, less accrued expenses, computed in each case since the most
recent determination of net asset value. Normally, a fund pays
distributions of net investment income monthly. A fund
will distribute at least annually all net realized capital gains,
if any, after applying any available capital loss carryovers. A
capital loss carryover is currently available for each fund,
other than the Pennsylvania fund. Distributions paid by a fund
with respect to class A shares will generally be greater than
those paid with respect to class B and class M shares because
expenses attributable to class B and class M shares will
generally be higher.
You begin earning distributions on the business day that
Putnam Mutual Funds receives payment for your shares. It is your
responsibility to see that your dealer forwards payment promptly.
You can choose from three distribution options:
- - Reinvest all distributions in additional shares of your
fund without a sales charge;
- - Receive distributions from net interest income in cash while
reinvesting net capital gains distributions, if any, in
additional shares of your fund without a sales charge; or
- - Receive all distributions in cash.
You can change your distribution option by notifying Putnam
Investor Services in writing. If you do not select an option
when you open your account, all distributions will be reinvested.
All distributions not paid in cash will be reinvested in shares
of the class on which the distributions are paid. You will
receive a statement confirming reinvestment of distributions in
additional fund shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.
<PAGE>
If a check representing a fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in your fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in that fund. Similarly, if
correspondence sent by a fund or Putnam Investor Services is
returned as "undeliverable," fund distributions will
automatically be reinvested in the fund or in another Putnam
fund.
Federal taxes
Each fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements necessary for that fund to be relieved of federal
taxes on income and gains it distributes to shareholders. Each
fund will distribute substantially all of its ordinary income and
capital gain net income on a current basis.
Fund distributions designated by a fund as "exempt-interest
dividends" are not generally subject to federal income tax.
However, if you receive social security or railroad retirement
benefits, you should consult your tax adviser to determine what
effect, if any, an investment in a fund may have on the taxation
of your benefits. In addition, an investment in a fund may
result in liability for federal alternative minimum tax and state
and local taxes, both for individual and corporate shareholders.
Each fund may at times purchase tax-exempt securities at a
discount from the price at which they were originally issued,
especially during periods of rising interest rates. For federal
income tax purposes, some or all of the market discount will be
included in each fund's ordinary income and will be taxable to
you as such when it is distributed to you.
Fund distributions other than exempt-interest dividends will be
taxable to you as ordinary income, except that any distributions
of net long-term capital gains will be taxable as such,
regardless of how long you have held your shares. Distributions
will be taxable as described above whether received in cash or in
shares through the reinvestment of distributions.
Early in each year Putnam Investor Services will notify you of
the amount and tax status of distributions paid to you for the
preceding year.
State taxes
General. Except as described below and in the SAI, to the extent
not tax-exempt under the state income tax regime to which you are
subject, your proportionate share of distributions from a fund's
net investment income and short-term capital gains, if any, will
be taxable as ordinary income, whether you take them in cash or
reinvest them in additional shares of that fund (except that
distributions reinvested in shares of the Michigan fund are
exempt from Michigan intangibles tax). The treatment for tax
purposes of distributions from a fund's long-term capital gains
is discussed below.
Arizona. It is the published position of the Arizona Department
of Revenue that distributions by a regulated investment company
are exempt from Arizona state income tax to the extent such
distributions are derived from interest on obligations the
interest on which is exempt from Arizona state income tax. As
long as the Arizona fund qualifies as a regulated investment
company, to the extent distributions by the Arizona fund are
derived from interest income with respect to U.S. Treasury
securities or, to the extent as described below, tax-exempt
securities (defined above under "How the funds pursue their
objectives--tax exempt securities"), such distributions will be
exempt from Arizona state personal income tax. In addition, it
is the published position of the Arizona Department of Revenue
that distributions by a regulated investment company derived from
certain other governmental obligations as to which federal law
specifically precludes state taxation of interest received by a
direct investor in such obligations are exempt from Arizona
personal state income tax.
Some tax-exempt securities of Arizona issuers have a direct
income tax exemption under Arizona law, independent of federal
tax treatment. However, in most cases, interest with respect to
tax-exempt securities of Arizona issuers is exempt from Arizona
state income tax only so long as that interest is excluded from
gross income for federal income tax purposes. Therefore, if
interest with respect to tax-exempt securities of Arizona issuers
held by the Arizona fund ceases to be exempt from federal income
tax (or is retroactively determined to be taxable under federal
law), then, unless that obligation has an independent statutory
tax exemption under Arizona law, distributions by the Arizona
fund derived from interest on that obligation will cease to be
exempt from state personal income taxes (and, if interest on the
obligation is determined to be taxable under federal law
retroactive to any date, those distributions may be considered
not to have been exempt from state income taxes from that date).
For Arizona personal income tax purposes, distributions by the
Arizona fund, other than distributions exempt from Arizona state
personal income tax, will be taxable as ordinary income, whether
paid in cash or reinvested in additional shares. Under current
Arizona income tax law, distributions of net capital gains earned
by the Arizona fund are not exempt from taxation and are taxed at
ordinary income tax rates.
<PAGE>
Florida. Florida does not currently impose an income tax on
individuals. Thus individual shareholders of the fund will not
be subject to any Florida state income tax on distributions
received from the Florida fund. However, certain distributions
will be taxable to corporate shareholders that are subject to
Florida corporate income tax.
Florida currently imposes an "intangibles tax" at the annual rate
of 0.2% on certain securities and other intangible assets owned
by Florida residents. Certain types of tax-exempt securities of
Florida issuers, U.S. government securities and tax-exempt
securities issued by certain U.S. territories and possessions are
exempt from this intangibles tax. The Florida fund has received
a ruling from Florida authorities that if on December 31 of any
year the Florida fund's portfolio consists solely of such exempt
assets, the Florida fund's shares will be exempt from the Florida
intangibles tax payable for the following year.
In order to take advantage of the exemption from the intangibles
tax in any year, the Florida fund must sell any non-exempt assets
held in its portfolio and reinvest the proceeds in exempt assets
prior to December 31. Transaction costs involved in
restructuring the portfolio in this fashion would likely reduce
the Florida fund's investment return and might exceed any
increased investment return the Florida fund achieved by
investing in non-exempt assets during the year.
Massachusetts. Distributions received from the Massachusetts
fund are exempt from Massachusetts personal income tax to the
extent that they are derived from interest on tax-exempt
securities and are designated as such. The Massachusetts fund
has obtained a tax ruling which recognizes for Massachusetts
personal income tax purposes the tax-exempt character of gains
realized by the fund on the sale of certain tax-exempt securities
when those gains are distributed to shareholders and designated
as such.
Distributions from investment income and capital gains, including
exempt-interest dividends, may be subject to Massachusetts
corporate excise tax.
The fund believes that distributions from net realized long-term
capital gains that are taxable by Massachusetts are reportable as
long-term capital gains, irrespective of how long the shareholder
has held shares in the fund. In 1994, the Massachusetts personal
income tax statute was modified to provide for graduated rates of
tax (with some exceptions) on long-term capital gains based on
the length of time the asset has been held since January 1, 1995.
There is as yet no official guidance concerning the treatment
under the revised statute of mutual fund shareholders that
receive capital gain distributions. However, the state
Department of Revenue has released "working" draft regulations
providing that the holding period of the mutual fund (rather than
that of its shareholders) will be determinative for purposes of
applying the revised statute to shareholders that receive capital
gain distributions, so long as the mutual fund separately
designates each portion of such distributions in a notice
provided to shareholders within 30 days of year-end. A challenge
to the new law is currently pending before the Massachusetts
Supreme Judicial Court. Shareholders should consult their tax
advisers with respect to the Massachusetts personal income tax
treatment of capital gain distributions from the fund.
Michigan. Distributions received from the Michigan fund are
exempt from Michigan personal income tax and excluded from the
taxable income base of the Michigan intangibles tax to the extent
they are derived from interest on tax-exempt securities, under
the current position of the Michigan Department of Treasury.
Such distributions, if received in connection with a
shareholder's business activity, may, however, be subject to
Michigan single business tax. See the SAI. For Michigan
personal income tax, intangibles tax and single business tax
purposes, fund distributions attributable to any source other
than interest on tax-exempt securities will be fully taxable.
Fund distributions may be subject to the uniform city income tax
imposed by certain Michigan cities.
Minnesota. In 1995, Minnesota enacted a statement of intent that
interest on obligations of Minnesota and its political
subdivisions and Indian tribes be included in net income of
individuals, estates and trusts for Minnesota income tax purposes
if it is judicially determined that Minnesota's exemption of such
interest and taxation of interest on obligations of other states
and their political subdivisions and Indian tribes unlawfully
discriminates against interstate commerce. This provision
applies to taxable years that begin during or after the calendar
year in which any such determination becomes final. Putnam
Management is not aware of any decision in which a court has held
that a state's exemption of interest on its own bonds or those of
its political subdivisions or Indian tribes and taxation of
interest on the bonds of other states or their political
subdivisions or Indian tribes unlawfully discriminates against
interstate commerce or otherwise contravenes the United States
Constitution. However, there can be no assurance that interest on
the tax-exempt securities held by the Minnesota fund would not
become taxable under this Minnesota statutory provision.
Shareholders of the Minnesota fund who are individuals, estates
or trusts will not be subject to Minnesota personal income tax on
fund distributions to the extent that such distributions qualify
as exempt-interest derived from interest on obligations of the
State of Minnesota and its agencies, instrumentalities, political
subdivisions and Indian tribes, provided that at least 95% of
the fund's total exempt-interest dividends are derived from
interest on obligations of such Minnesota entities.
Exempt-interest dividends attributable to interest on certain
private activity bonds issued after August 7, 1986 will be
included in Minnesota "alternative taxable income" of
individuals, estates and trusts for purposes of computing
Minnesota's alternative minimum tax.
Losses of individuals, estates and trusts that are disallowed or
treated as long-term losses under current federal law by reason
of the shareholder's receipt of exempt-interest dividends or
capital gain dividends, respectively, are treated similarly under
Minnesota law, notwithstanding, in the case of exempt-interest
dividends, that such dividends may not be fully excludable from
Minnesota gross income.
Fund distributions are not excluded in determining the Minnesota
franchise tax on corporations measured by net income or the
Minnesota alternative minimum tax on corporations.
New Jersey. The New Jersey fund intends to qualify as a
"qualified investment fund" under the New Jersey Gross Income Tax
law except when investing for defensive purposes under certain
circumstances. As long as the New Jersey fund is a qualified
investment fund and to the extent its distributions are derived
from interest or net gains on tax-exempt securities, such
distributions will be exempt from New Jersey gross income
tax, but will be included in the net income tax base for
purposes of computing the corporate business tax. The exemption
from the New Jersey Gross Income Tax will also extend to interest
or net gains on obligations of the United States, its territories
and certain of its agencies and instrumentalities which pay
interest free from state or local taxation under any laws of New
Jersey or under the Constitution or other laws of the United
States. Gains resulting from the redemption or sale of shares of
the New Jersey fund will also be exempt from New Jersey Gross
Income Tax.
In order to be a qualified investment fund, the New Jersey fund
must, as of the end of each fiscal quarter, invest at least 80%
of the aggregate principal amount of its investments (excluding
financial options, futures, forward contracts, or other similar
financial instruments related to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto
to the extent such instruments are authorized under the regulated
investment company rules under the Internal Revenue Code, and
cash and cash items, which cash items shall include receivables)
in the exempt obligations referred to above and have no
investments other than interest bearing or discounted
obligations, cash or cash items (including receivables) and
financial options, futures, forward contracts or certain other
similar instruments related to interest-bearing or discounted
obligations or bond indexes related thereto. If the New Jersey
fund fails to be a qualified investment fund, as a result of
employing alternative investment strategies or otherwise, it
is possible that all or a portion of its distributions for
the entire taxable year will not qualify for tax-exempt
status under New Jersey law.
For New Jersey Gross Income Tax purposes, distributions by the
fund derived from income or net gains on investments other than
tax-exempt securities and obligations of the United States, its
territories and certain of its agencies and instrumentalities
will be taxable as ordinary income, whether paid in cash or
reinvested in additional shares.
<PAGE>
Ohio. Distributions received from the Ohio fund are exempt from
Ohio personal income tax and school district and municipal income
taxes in Ohio to the extent they are properly attributable to
interest on obligations issued by the State of Ohio, political
subdivisions thereof, or agencies or instrumentalities thereof
("Ohio Obligations"), provided that the Ohio fund continues to
qualify as a regulated investment company for federal income tax
purposes and that at all times at least 50% of the value of the
total assets of the fund consists of Ohio Obligations or similar
obligations of other states or their subdivisions. It is assumed
for purposes of this discussion of Ohio taxation that these
requirements are satisfied. All distributions received from the
Ohio fund are excluded from the net income base of the Ohio
corporation franchise tax to the extent that they (a) are
properly attributable to interest on Ohio Obligations, or (b)
represent exempt-interest dividends for federal income tax
purposes. The Ohio fund's shares will be included in a
shareholder's tax base for purposes of computing the Ohio
franchise tax on the net worth basis.
Distributions of capital gain received from the Ohio fund will be
exempt from Ohio personal income tax and school district income
taxes and municipal income taxes in Ohio and will be excluded
from the net income base of the Ohio corporation franchise tax,
in each case to the extent that such distributions are properly
attributable to profit made on the sale, exchange or other
disposition by the Ohio fund of Ohio Obligations.
Distributions properly attributable to interest on obligations of
the United States or of any authority, commission, or
instrumentality of the United States or obligations of Puerto
Rico, the Virgin Islands, or Guam or their authorities or
instrumentalities will be exempt from Ohio personal income tax
and school district and municipal income taxes in Ohio, and are
excluded from the net income base of the Ohio corporation
franchise tax.
<PAGE>
Pennsylvania. Distributions paid by the Pennsylvania fund will
not be subject to the Pennsylvania personal income tax or to the
Philadelphia School District investment net income tax to the
extent that the distributions are attributable to interest
received by the Pennsylvania fund from its investments in tax-
exempt securities and obligations of the United States, its
territories and certain of its agencies and instrumentalities.
Distributions by the Pennsylvania fund to a Pennsylvania resident
that are attributable to other sources may be subject to the
Pennsylvania personal income tax and (for residents of
Philadelphia) to the Philadelphia School District investment net
income tax whether paid in cash or reinvested in additional
shares. Distributions paid by the Pennsylvania fund which are
excludable as exempt income for federal tax purposes are not
subject to the Pennsylvania corporate net income tax. For a more
detailed description of Pennsylvania corporate income tax, see
the SAI.
Individual shareholders of the Pennsylvania fund who are subject
to the personal property taxes levied by certain Pennsylvania
counties, cities and school districts will be exempt from such
tax on their shares of the Pennsylvania fund to the extent that
the Pennsylvania fund's portfolio consists of tax-exempt
securities and obligations of the United States, its territories
and certain of its agencies and instrumentalities. Corporations
are not subject to Pennsylvania personal property taxes.
General
The foregoing is a summary of certain federal and state income
tax consequences of investing in a fund. You should consult your
tax adviser to determine the precise effect of an investment in a
fund on your particular tax situation (including possible
liability for federal alternative minimum tax and for state and
local taxes).
<PAGE>
About Putnam Investments, Inc.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the funds and
of other Putnam funds. Putnam Fiduciary Trust Company is the
custodian of the funds. Putnam Investor Services, a division of
Putnam Fiduciary Trust Company, is the investor servicing and
transfer agent for the funds.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly owned by Marsh & McLennan Companies, Inc., a publicly-
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
Appendix
Security ratings
The ratings services' descriptions are as follows:
Moody's Investors Service, Inc.:
Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than
the Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Ratings of Corporate Obligations
The Moody's corporate obligations ratings of Aaa, Aa, A and Baa
and the Standard & Poor's corporate obligations ratings of AAA,
AA, A and BBB do not differ materially from those set forth above
for tax-exempt securities.<PAGE>
Standard & Poor's:
Bonds
AAA -- Debt rated `AAA' has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA -- Debt rated `AA' has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only
in small degree.
A -- Debt rated `A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Debt rated `BBB' is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB-B-CCC-CC-C -- Debt rated `BB',`B',`CCC',`CC' and`C' is
regarded on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with
the terms of the obligation. `BB' indicates the lowest degree of
speculation and `C' the highest. While such debt will likely have
some quality and protective characteristics, these are outweighed
by large uncertainties or major exposures to adverse conditions.
BB -- Debt rated `BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The `BB' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied `BBB-' rating.
Commercial paper
A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated`A-1'.
<PAGE>
Duff & Phelps Corporation
Long-Term Debt
AAA -- Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- -- High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A+, A, A- -- Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB- -- Below-average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B- -- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a
higher or lower rating grade.
Fitch Investors Service, Inc.
AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
AA -- Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated AAA.
A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB -- Bonds considered to be speculative. The obligor's ability
to pay interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements.
B -- Bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligor's ability to pay interest
over the life of the issue and repay principal when due.
<PAGE>
Glossary of terms
Bond An IOU issued by a government or corporation
that usually pays interest.
- -----------------------------------------------------------------
Capital A rise in an investment's principal
value.
appreciation Also used to describe the investment
objective of a mutual fund whose primary
criterion for choosing securities is the
potential to rise in value rather than to
provide dividend income.
- -----------------------------------------------------------------
Capital A profit or loss on the sale of securities
gain/loss (generally stocks or bonds).
- -----------------------------------------------------------------
Class A, B,
M Types of shares, each class offering
shares investors a different way to pay sales
charges and distribution fees. A fund's
prospectus explains the availability and
attributes of each type.
- -----------------------------------------------------------------
Common A unit of ownership of a corporation.
stock
- -----------------------------------------------------------------
Contingent A charge applied at the time of redemption of
deferred certain mutual fund shares, rather than at
the
sales
charge time of purchase. A fund's CDSC generally
(CDSC) declines each year after purchase , until
it no longer applies.
- -----------------------------------------------------------------
Cost basis The purchase price of mutual fund shares for tax
purposes, adjusted for such things as share
splits, distributions, and return of capital
distributions.
- -----------------------------------------------------------------
Declaration The date on which the Trustees approve the
date amount of a mutual fund's next distribution.
- -----------------------------------------------------------------
Distribution A payment from a mutual fund to shareholders. It
may include interest from bonds and dividends
from stocks (dividend distributions). It may
also include profits from the sale of securities
from the fund's portfolio (capital gains
distributions).
--------------------------------------------------------------
- ---
Diversification Investing in a number of securities to reduce
the effect of any one investment going bad. A
basic premise of mutual fund investing.
- -----------------------------------------------------------------
Dividend For mutual fund shares, a payment derived solely
from dividends or interest paid on securities
held in the portfolio (i.e. not including
capital gains).
- -----------------------------------------------------------------
Equity Securities representing ownership in a
securities corporation. Common stock and preferred
stock are equity securities.
- -----------------------------------------------------------------
Ex-dividend The date on or after which a new shareholder
date will not receive the fund's next
distribution. For Putnam funds, it is the same
as the record date.
--------------------------------------------------------------
- ---
Fiscal year Typically an accounting period of 365 days (366
days in leap years) for which a mutual fund
prepares financial statements and performance
data. For administrative reasons, it often
differs from a calendar year.
- -----------------------------------------------------------------
Fixed-income Securities that pay an unchanging rate of
securities interest or dividends. Bonds, notes, bills,
money market instruments, and preferred stocks
may all be considered fixed-income securities.
- -----------------------------------------------------------------
Net asset The value of one share of a mutual fund
value (NAV) without regard to sales charges. Some bond funds
aim for a steady NAV, representing stability;
most stock funds aim to raise NAV, representing
growth in the value of an investment.
- -----------------------------------------------------------------
Payable date The date on which a mutual fund pays its
distributions to shareholders.
- -----------------------------------------------------------------
Public The purchase price of one class A share or
offering
price class M share of a mutual fund, including
the
(POP) applicable up-front sales charge.
----------------------------------------------------------
- -------
Record date The date used to determine which shareholders
are entitled to a distribution. After the record
date, shares are sold "ex-dividend," or without
the dividend. For Putnam funds, the ex-dividend
date is the same as the record date.
- -----------------------------------------------------------------
Total return A measure of performance showing the change in
the value of an investment over a given period,
assuming all earnings are reinvested .
- -----------------------------------------------------------------
Yield The percentage rate at which a fund has earned
income from its investments over the indicated
period. "Dividend rate" is a current return
that includes interest and dividend income, net
of all fund expenses. "Distribution rate" is a
current return that includes short-term capital
gains, as well as net investment income. "SEC
yield" is a current return based on net
investment income over a recent 30-day period,
computed on a yield-to-maturity basis, which may
differ from net investment income as determined
for financial reporting purposes. All of these
returns are calculated by annualizing the
dividends or distributions over the indicated
period and dividing by the price of a
share at the end of the period.<PAGE>
Make the most of your Putnam privileges
As a Putnam mutual fund shareholder, you have access to a number
of services that can help you build a more effective and flexible
financial program. Here are some of the ways you can use these
privileges to make the most of your Putnam mutual fund
investment.
SYSTEMATIC INVESTMENT PLAN
Invest as much as you wish ($25 or more) on any business day of
the month except for the 29th, 30th, or 31st. The amount you
choose will be automatically transferred each month from your
checking or savings account.
SYSTEMATIC WITHDRAWAL
Make regular withdrawals of $50 or more monthly, quarterly, or
semiannually from your Putnam mutual fund account valued at
$10,000 or more. Your automatic withdrawal may be made on any
business day of the month except for the 29th, 30th, or 31st.
SYSTEMATIC EXCHANGE
Transfer assets automatically from one Putnam account to another
on a regular, prearranged basis. There is no additional charge
for this service.
FREE EXCHANGE PRIVILEGE
Exchange money between Putnam funds in the same class of shares
without charge. The exchange privilege allows you to adjust your
investments as your objectives change. A signature guarantee is
required for exchanges of more than $500,000 and shares of all
Putnam funds may not be available to all investors.
DIVIDENDS PLUS
Diversify your portfolio by investing dividends and other
distributions from one Putnam fund automatically into another at
net asset value.
STATEMENT OF INTENTION
To reduce a front-end sales charge, you may agree to invest a
minimum dollar amount over 13 months. Depending on your fund,
the minimum is $25,000, $50,000, or $100,000. Whenever you make
an investment under this arrangement, you or your investment
advisor should notify Putnam that a Statement of Intention is in
effect.
Investors may not maintain, within the same fund, simultaneous
plans for systematic investment or exchange (into the fund) and
systematic withdrawal or exchange (out of the fund). These
privileges are subject to change or termination.
For more information about any of these services and privileges,
call your investment advisor or a Putnam customer service
representative toll free at 1-800-225-1581.
Putnam Family of Funds*
PUTNAM GROWTH FUNDS
Putnam Asia Pacific Growth Fund
Putnam Capital Appreciation Fund
Putnam Diversified Equity Trust
Putnam Emerging Markets Fund
Putnam Europe Growth Fund
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
Putnam Health Sciences Trust
Putnam International Growth Fund
Putnam International New Opportunities Fund
Putnam International Voyager Fund
Putnam Investors Fund
Putnam New Opportunities Fund
Putnam OTC & Emerging Growth Fund+
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II
PUTNAM GROWTH AND INCOME FUNDS
Putnam Balanced Retirement Fund
Putnam Convertible Income-Growth Trust
Putnam Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam International Growth and Income Fund
Putnam New Value Fund
Putnam Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Putnam American Government Income Fund
Putnam Diversified Income Trust
Putnam Diversified Income Trust II
Putnam Federal Income Trust
Putnam Global Governmental Income Trust
Putnam High Yield Advantage Fund
Putnam High Yield Total Return Fund
Putnam High Yield Trust++
Putnam Income Fund
Putnam Intermediate U.S. Government Income Fund
Putnam Preferred Income Fund
Putnam U.S. Government Income Trust
PUTNAM TAX-FREE INCOME FUNDS
Putnam Municipal Income Fund
Putnam Tax Exempt Income Fund
Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund
Putnam State tax-free income funds+++
Arizona, California, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, New York, Ohio,
and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that
spread your money across a variety of stocks, bonds, and money
market investments seeking to help maximize your return and
reduce your risk.
The three portfolios:
Balanced Portfolio
Conservative Portfolio
Growth Portfolio
PUTNAM MONEY MARKET FUNDS**
Putnam Money Market Fund
Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund
*As of 1/1/97.
+Formerly Putnam OTC Emerging Growth Fund.
++Closed to new investors.
+++Not available in all states.
**Investments in money market funds are neither insured nor
guaranteed by the U.S. government. These funds are managed to
maintain a steady net asset value of $1.00 per share, although
there is no assurance this net asset value will be maintained in
the future.
Please call your financial advisor or Putnam to obtain a
prospectus for any Putnam fund. It contains more complete
information, including charges and expenses. Read it carefully
before you invest or send money.
<PAGE>
PUTNAM ARIZONA TAX EXEMPT INCOME FUND
PUTNAM FLORIDA TAX EXEMPT INCOME FUND
PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND
PUTNAM MICHIGAN TAX EXEMPT INCOME FUND
PUTNAM MINNESOTA TAX EXEMPT INCOME FUND
PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND
PUTNAM OHIO TAX EXEMPT INCOME FUND
PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION
INVESTMENT MANAGER:
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA
02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Arizona, Michigan, New Jersey and Ohio funds
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Florida, Massachusetts, Minnesota and Pennsylvania funds
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
